News & market updates

Secondary bond market ended the week bullish as yields fell sharply across the curve after improved risk sentiment following reports of a potential US‑Iran peace deal. Weekly T‑bill yields rose (91-day to 10.09%), while Thursday's bond auction raised Rs.92.55bn (61.7% of offer) with mixed maturity outcomes.

Oil prices fell after the U.S. and Iran reached an initial deal to end the war and reopen the Strait of Hormuz; Brent fell $4.08 (4.7%) to $83.25/bbl and WTI fell $4.35 (5.1%) to $80.53.

Asian share markets surged and Brent crude fell about 4% to $83.80 after a tentative US–Iran deal eased supply concerns, reducing inflationary pressure and lessening the need for tighter policy as central banks meet this week; U.S. yields fell and the dollar weakened.

ADB announced a $4 billion financing package to help 15 countries, with Sri Lanka first to receive $100m, to mitigate economic fallout from the Middle East conflict. The package includes about $3bn in government-requested support and $1bn for trade finance, raising Sri Lanka's planned 2026 ADB budget support to $480m.

Brent crude slipped below $90 after President Trump said planned strikes on Iran were cancelled and talks were progressing, easing supply-risk fears; Brent traded about $88–$89/bbl while WTI was around $86/bbl.

ADB is providing $4 billion in rapid financing — about $3 billion requested by governments and $1 billion in trade finance — to help countries, including Sri Lanka, withstand fallout from the Middle East conflict. Support includes policy-based loans, trade finance for energy and food imports, and rapid repurposing of existing funds.

ADB is deploying $4 billion to help countries including Sri Lanka manage impacts from the West Asia conflict, with about $3 billion requested by governments and $1 billion for trade finance for energy and food imports. Support includes policy-based loans, countercyclical financing, rapid repurposing of portfolios and emergency assistance.

Oil prices fell after U.S. President Trump called off planned strikes on Iran, with Brent down $1.83 (2%) to $88.55/bbl and WTI down $1.60 (1.8%) to $86.11. OPEC also lowered its 2026 world oil demand growth forecast to 970,000 bpd from 1.17 million bpd.

World Bank says Middle East conflict will slow global growth to 2.5% in 2026 (the lowest since COVID-19) and is ready to provide up to $100 billion to affected countries over 15 months. It warns higher energy prices (Brent ~ $94/bbl in 2026), rising inflation and borrowing costs, and downside risks that could cut growth to 1.3% if disruptions worsen.

Fitch revised its 2026 global sovereign sector outlook to 'deteriorating' from 'neutral', citing spillovers from the US‑Iran war that will weaken GDP, raise inflation and push up bond yields. Fitch said Greater China is the only region upgraded to 'neutral' due to strong exports and lower energy exposure.

Rs.150 billion Treasury Bond auction delivered mixed results — weighted average yields came in below expectations but the offered amounts were not fully raised and the longest 01.07.37 maturity was rejected. Secondary market yields eased after the auction, net liquidity surplus was Rs.66.62bn, overnight call/repo ~9.2%, and USD/LKR closed at 335.00/337.50.

Rystad Energy warns oil could hit $150/barrel if hostilities between the U.S. and Iran resume, citing supply shut-ins and Strait of Hormuz disruptions. Prices spiked after recent U.S. strikes and major oil executives say inventories are nearing rock-bottom.

The United States became the world's top oil exporter, shipping about 10.5 million barrels per day in May, surpassing Russia (7.0m bpd) and Saudi Arabia (5.9m bpd). The shift is driven by high U.S. shale output, releases from strategic reserves and disruptions to Saudi and Russian flows.

Iran announced the Strait of Hormuz is closed to all vessels, pushing Brent crude above $95 and WTI above $92. The EIA and JPMorgan warn OECD inventories could fall to multi-decade lows by end-2026 and project Brent averaging around $100/bbl in a base case, rising if the blockade continues.

T-Bill yields rose for the fourth consecutive week—91-day 10.09%, 182-day 10.27% and 364-day 10.16%, the highest since late Sept 2024. The rupee appreciated after CBSL cut exporters' FX conversion time to 30 days; the auction accepted Rs.71.744b of Rs.140b (51.25%) ahead of a Rs.150b bond auction.

Health Minister Dr. Nalinda Jayatissa said authorities are reviewing requests to raise medicine prices amid rising import and production costs and exchange-rate movements. The Sri Lanka Chamber of the Pharmaceutical Industry warned supply-chain pressures, higher freight and fuel charges and rupee depreciation risk medicine shortages.

Frontier Research says Sri Lanka is better placed to absorb a potential El Niño due to stronger fiscal and external buffers, but warns of short-term pains. It cites an 80% chance of El Niño in June–August 2026 (over 90% through November) and warns disruptions to agriculture, energy and supply chains that could raise inflation.

Asian stocks slid as Middle East tensions escalated and oil rose (Brent +0.9% to $92.29/bbl), amplifying inflation concerns and the prospect of further interest-rate moves. Investors are focused on upcoming U.S. CPI data and central bank responses.

Asian equities were mixed with tech stocks leading gains as oil prices eased—Brent fell to $93.84/barrel—after a prior surge linked to fighting in the Middle East; higher oil-driven inflation and rising yields are weighing on markets.

Sri Lanka's Central Bank ordered exporters to convert export dollar proceeds within one month (down from three) effective immediately to curb rupee depreciation. The move follows a $211m defence of the currency in May and a 100bp overnight policy rate hike on May 26.

Dividend · Rs 5.00 · XD Jul 10, 2026

First And Final dividend of LKR 5/share; XD 2026-07-10; record 2026-07-12; payable 2026-07-30; FY 2025/2026

The IMF approved Sri Lanka’s combined Fifth and Sixth Reviews on 28 May 2026, releasing SDR 508 million (~US$695m) and bringing total EFF disbursements to SDR 1.778 billion (~US$2.4bn). The Fund said stabilisation has improved revenues, growth and reserves but warned debt sustainability remains “very high” and key structural reforms (electricity, public financial management) are unfinished.

ADB President Masato Kanda said the Pan-Asia Power Grid Initiative will mobilize $50 billion by 2035, with ADB providing half, to connect regional power systems, add 20 GW of renewables and 22,000 circuit‑km of transmission, cutting emissions and creating jobs.

Oil prices fell after Iran and Israel said they halted attacks following a U.S. appeal; Brent dropped $0.91 (1%) to $93.34/bbl and WTI fell $1.13 (1.2%) to $90.17, though both sides warned hostilities could resume.

Fitch cut its forecast for global growth in 2026 by 0.2 percentage points to 2.4% as an oil shock from the US‑Iran conflict and a prolonged Strait of Hormuz closure lifts energy prices (Brent now seen at $87/bbl for 2026). The agency said a tech investment boom cushions activity and central banks are likely to hold rates this year amid higher inflation risks.

Asian markets plunged on Monday as a tech-led sell-off and a rise in oil prices sparked volatility — South Korea's Kospi briefly halted trading after an almost 9% intraday fall and closed 8.3% lower. US indexes partly recovered amid investor concern that higher US interest rates and energy-driven inflation could persist.

The Ceylon Chamber will hold the 26th Sri Lanka Economic and Investment Summit on 12–13 October, focused on economic growth, competitiveness, investment and structural reforms. Sessions will cover trade and regional integration, energy security, digital transformation and healthcare.

ASPI fell 1.57% (340.85 pts) to 21,403.28 as investors sold off amid escalating Middle East tensions and regional market weakness; turnover was Rs. 2.61bn with a net foreign outflow of Rs. 54.12m and oil prices up ~3% which lifted the US dollar.

New active credit cards in Sri Lanka rose by 12,999 in April, down from 22,473 in March, taking total active cards to 2,228,852 by end-April. Analysts say growth was driven by economic recovery and falling rates but may slow after the Central Bank's 100bp May rate hike and amid fuel rationing.

IMF cut Sri Lanka's 2026 growth forecast to 3% and approved temporary fiscal easing under the EFF, enabling an immediate SDR 508m (~$695m) disbursement. It also lowered end‑2026 reserve projections to $8.645bn and trimmed 2026 tourism earnings to $2.5bn.